2011 Index of Silicon Valley - Silicon Valley Community Foundation

Based on San Mateo County June 2010 year-end financial status, annual deficits by fiscal year 2014/15 could reach $124 million in
San Mateo County (Figure 2-16) primarily due to decreasing tax revenues, state budget reductions and investment losses as opposed
to increasing costs and greater demand for county services. San Mateo County balanced the 2010/11 budget by cutting $36 million
from programs and using $90 million in reserves. Since the 2007/08 fiscal year, the County has used $248 million from its reserve
fund. 12 Without changes to the current revenue and spending levels, the General Fund reserves in San Mateo County risk depletion
in the near future. Similar information was not available for Santa Clara County.
Figure 2-16
San Mateo Projected Deficit in General Fund
$500
Dollars (in Millions)
450
400
350
300
$302
$299
$334
$309
$405
$398
$369 $376
($100M)
($70M)
($99M)
$322
$306 $299 $305
$416
($104M)
$312
$438
($117M)
$321
$454
($124M)
$330
250
FY 06-07
Actual
FY 07-08
Actual
FY 08-09
Actual
FY 09-10
Actual
FY 10-11
Projected
FY 11-12
Projected
FY 12-13
Projected
FY 13-14
Projected
FY 14-15
Projected
Source: San Mateo County
Ongoing Net County Cost
Ongoing Discretionary Revenues
12 San Mateo County's Adopted Budget, San Mateo County, July 2010.
Choices for the Future
While the federal deficit is a well known problem, another equally challenging financial crisis is looming involving local governments.
Meredith Whitney, one of the most respected financial analysts on Wall Street, who was among the first to warn of the impact the
subprime mortgage meltdown would have on banks, is warning that she sees similar problems with state and local government finances.
Silicon Valley communities face considerable challenges in financing their future. Local and regional economies characterized by struggling
housing markets, slow consumer spending, and high levels of unemployment are driving declines in city revenues at a time when they
face ballooning employee health care costs and pension fund obligations. In response, counties and cities are cutting personnel,
infrastructure investments and key services.
Any effort to significantly reduce the growth of our deficit or debt over the long-term will require further cuts to reduce or eliminate
services, increases in revenue, and more likely than not, some combination of the two.
These are difficult choices because further cuts would impact the very programs that have fueled past cycles of economic growth while
providing a safety net for those in need and yet, increasing revenues is challenging with restrictions on local government’s ability to
raise taxes and fees in a politically unfavorable climate.
We are at a challenging moment in time. We need to ask ourselves a critical set of questions:
• What kind of government do we want, now and in the future
• What is the appropriate role of public institutions in securing broadly shared prosperity and opportunity for all
• What role should government play in providing a safety net for vulnerable families and individuals
• What changes are needed in state and local government’s budget rules, taxing, and spending in order to promote
our vision for California’s future
• What autonomy should counties and cities have to control revenue sources for services that they provide
• What role should local government play in enabling economic development—to generate jobs for residents and
revenue for community services
This Special Analysis has outlined the facts facing Silicon Valley. There are no silver bullets or short cuts that we can take to avoid the
tough choices that lie ahead. But these choices must be made to restore the vital cycle that links our economy and community.
67